💱 Nasdaq's a Security Token Exchange?

USDC could be a security and Nasdaq is moving closer to becoming a security token exchange!

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Gooood morning Rainmakers!

This newsletter comes to you live from an airplane on my way to Miami!

Here's a quick roundup for all of you short-attention peeps 😉

1️⃣ Nasdaq is moving closer and closer to becoming a security token exchange. They are innovating the pre-IPO trading marketplace!

2️⃣ The USDC stablecoin might be a security. According to SEC Chairman, Gary Gensler, stablecoins could potentially become a security!

Without further ado, let's dive right in and…

Get liquid 💧


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💱 Nasdaq Is Now a Security Token Exchange??

Not yet!

However, just this last week, Nasdaq is moving closer & closer to becoming a security token exchange.

How?

Well, let's back up just a tad.

In 2013, Nasdaq and SharesPost, one of the leading platforms to trade private company shares, came together to expand operations.

Since then, Nasdaq Private Markets has become one of the leading platforms facilitating private company trades.

Fast forward to the present day and Nasdaq Private Markets just got an upgrade…

Yes, Mr.hamster, things are moving even for one of the most credible financial institutions in the game.

Nasdaq is joining forces with other financial incumbents, Goldman Sachs Group, & Morgan Stanley to spin out its marketplace for shares of private companies!

The coolest thing about the marketplace is it enables existing shareholders to cash out their equity and allows accredited investors to get in on the deal before the company goes public.

Let's play out a scenario on why existing shareholders & investors would want this:

Johnny Appleseed has been an employee at Company X for 10 years and their equity is worth $500K on paper.

Johnny is scared about the volatility of the upcoming IPO and would rather sell his stake to an investor who is willing to take that risk.

Investor A sees long-term potential in Company X and buys Johnny's equity from him in the Nasdaq Private Marketplace - enabling Investor A to potentially get in at a lower valuation prior to the IPO.

Johnny receives a $500K compensations for the sale of his equity.

Investor A receives shares at the pre-IPO valuation.

The platform handled $4.6 billion in total transaction value in the first half of 2021, the highest level in three years, which included the recent Coinbase IPO.

Due to the paperwork requirements of private-securities deals, it usually takes weeks for a trade agreed on to result in the actual delivery of the shares.

I know Dwight, it's super ridiculous, but this is something that Nasdaq and security tokens are innovating!

You might be wondering okay this is cool and all, but what does this have to do with security tokens?

Great question again! I swear your guys’ questions just keep getting better 😂

The answer is that security tokens and trading pre-IPO shares are actually pretty similar.

In fact, the vast majority of security tokens are private companies that are tradable by the public.

The main difference is security tokens aren't just pre-IPO shares but are tradable at any point in time in a company's lifecycle.

All of this tells me this is the next evolution before blockchain goes mainstream for securities!


😲 The USDC Stablecoin Is a Security??

*Immediately liquidates USDC*

Not so fast, don't jump the gun just yet - nothing has been decided yet and I'd imagine it would take a very long time before anything is.

Newly elected SEC commissioner, Gary Gensler, has recently begun cracking down on cryptocurrencies and ensuring that all cryptos are following securities laws.

Circle, the financial services firm behind the USDC stablecoin, could face some unfortunate circumstances if stablecoins are deemed a security.

For those of you who missed it, Circle recently announced a SPAC deal that would value them at $4.5B.

It would be quite unfortunate if the deal was put on hold due to the uncertainty.

Gensler had this to say on the matter:

“Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities,” he said. “These platforms – whether in the decentralized or centralized finance space – are implicated by the securities laws and must work within our securities regime.”

Gensler is not messing around.

Let's translate this quote.

Gensler is essentially saying that it doesn't matter how a cryptocurrency has exposure to a security, if it has exposure at all, it's a security.

For example, the USDC stablecoin is backed by cash, money market funds, commercial paper, corporate and municipal bonds, and certificates of deposits issued by foreign banks.

Based on Gensler's claims of what constitutes a security, it looks like USDC could quite possibly become one.

Securities laws are very strict in the U.S. and if they aren't followed to the tee, then there can be serious repercussions.

As I always say when it comes to securities regulation:

“You either comply or die.”

This is an unprecedented case in the making and it will be very interesting to watch it play out!


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Thanks for tuning in! Keep an eye out each Monday for the next security token adventure 🧗‍♀️

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Everything in this report is for informational and entertainment purposes only. Nothing in this report should be taken as financial advice or as an inducement to purchase or sell any security. Nothing in this market report should be used as legal advice. Always do your own research before making any decisions regarding financial transactions of securities.